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Last Updated : Jun 20, 2019 01:17 PM IST | Source: Moneycontrol.com

Buy Ashok Leyland; target of Rs 104: LKP Research

LKP Research is bullish on Ashok Leyland has recommended buy rating on the stock with a target price of Rs 104 in its research report dated May 28, 2019.

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LKP Research's research report on Ashok Leyland


Ashok Leyland (ALL) reported 0.8% yoy and 40% qoq growth in the topline. Volume dip was at 1% yoy while growing at 32% qoq. The realizations were up by about 2.2% yoy and 6% qoq. The company’s market share rose by 180 bps to 36.9% by the end of the quarter and this year. Margins came in at 11.1%, 70 bps down yoy and 80 bps up qoq as RM costs were up, high margin defense business narrowed, exports were weak and discounting went up. However, they were broadly in line with market expectations. Below the operating profits level, other income dropped, while depreciation moved up by 9% yoy and 14.1% qoq. On account of lower other income and lower tax rate, net profits adjusted for an exceptional item came in at ₹6.53 bn, which was up by 71%qoq and down by 2.2% yoy.


Outlook


On the margin front, softening on price hikes, LCV merger, Modular program, cost cutting initiatives, price hikes etc will drive margins, however, increasingly strong discounting may steal the steam. Reduction in inventories and limited capex growth (₹ 10-15 bn in FY 20 v/s 9.5 bn in FY 19) will lead to maintenance of near 20-25% return ratios. With strong prospects for LCV business and increased focus from management, we still remain sanguine on the stock. We maintain BUY rating with a reduced target of ₹ 104 on uncertain volume outlook.


For all recommendations report, click here


Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.




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First Published on Jun 20, 2019 01:17 pm
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